Hong Kong’s blank-cheque companies are landing their first acquisition targets but corporate executives warn that tight rules are stifling the risk-taking they are meant to reward.

Last month heralded the first Hong Kong special purpose acquisition vehicle to close a deal, merging with Synagistics, a Singaporean ecommerce company.

The acquisition by the blank-cheque company, headed up by Norman Chan, former head of the Hong Kong Monetary Authority, is likely to be followed by two other mergers that are awaiting final approval from regulators.

Hong Kong authorities regard Spacs, permitted for the first time in 2022, as a way to reanimate their domestic equity market and attract more international companies to list in the territory.

Spacs typically look to raise funds through listing on a stock market, and then aim to purchase a private company, pulling its target on to public markets — a so-called de-spac transaction.

But executives who have been through the process are warning that trickle is unlikely to become a flood.

“Arguably, it’s actually more complicated in terms of process than to go through a listing,” said Katherine Tsang, who was an executive director of the investment vehicle behind the Synagistics deal alongside Chan. She is also a former chair of Standard Chartered in Greater China.

After conducting merger talks with a promising private company, “they still need it to go through the entire IPO vetting process”, she added.

The experience underscores the delicate balance for Hong Kong as it tries to maintain its attractiveness as an international listings hub while its market moves closer to mainland China.

KPMG estimates the territory is the fourth-largest market for new listings by market value this year, but the numbers were boosted by just one company — the $4bn listing of Midea, a Chinese electronics manufacturer.

China’s sluggish rebound from the coronavirus pandemic has also damped stock market valuations. Hong Kong’s equity market has received a much-needed boost from Beijing’s policy stimulus launched in September, with the Hang Seng index notching its best week since 1998 upon the news of the policy blitz.

But the market has since come down as investors express disappointment in the mainland fiscal stimulus so far and hedge the potential damage of a second Donald Trump presidency in the US.

Authorities sought to emulate the Spac boom in the US in 2021, which raised some $163bn for companies to hunt for deal targets, according to data from Dealogic. The new rules were intended as another route for dealmaking in Asia.

“The beauty of a Spac is that the funds are ready, and for companies looking to list on the Hong Kong exchange I think it will be an attractive alternative to the listing path,” said Jean Thio, capital markets partner at law firm Clifford Chance.

She pointed out that private companies could establish their valuations through direct negotiation with an acquirer, rather than rely on the market price.

“There might be special interest for specialist tech companies as well as companies without market peers listed on the HK exchange,” she said.

However, Hong Kong also sought to guard against low standards: the US boom was widely seen as leading to a bubble — with one short seller dubbing them “castles in the sky”. Critics of the boom in the US say it enriched Spac founders and advisers while often punishing investors, especially retail money.

“I didn’t feel entirely comfortable with it [in the US] . . . the promoters were some strange characters, baseball stars, with no actual finance experience acting as promoters,” said Chan.

The regulations stipulate that Hong Kong Spacs have to meet all the same requirements as an initial public offering. Moreover, unlike in the US, investing in Spacs is only open to professional investors rather than being a retail money play.

Only five Spacs have raised money in Hong Kong since the new rules were introduced nearly three years ago, according to Dealogic.

Optimists say Spacs can find their utility by helping more niche, or foreign, companies list on the Hong Kong exchange.

Chan said his company’s “network”, which includes the main investors in the Spac, would help the Singaporean data company attract vendors in Greater China who are targeting the large south-east Asian market.

But as Hong Kong moves closer to mainland China economically, market participants fear the territory’s capital markets are still overly reliant on Chinese companies looking for an offshore secondary listing.

“The traditional [Chinese] A-share companies doing secondary listings would not be able to do a de-spac,” added Thio.

“In fact, any kind of Chinese companies would be subject to CSRC [mainland Chinese regulator] rules and regulatory approvals. It’s something that puts the timeline into uncertainty.”

One adviser who works on Spac transactions in Hong Kong said they were doubtful the new listing avenue would lead to any meaningful amount of new companies listing in the territory. 

“Hong Kong has always said they don’t like backdoor listings. But [de-]spacs are by definition backdoor listings,” said the adviser, who did not have authorisation to speak publicly. 

“It’s no different to applying for a new initial public offering — you need all the vetting. If you look around, the global trend is that Spacs have not done well. I don’t think they will get bigger in the future.”

Synagistics’s share price has underlined the growing caution. After listing it leapt as much as 400 per cent from its debut price of HK$10 ($1.29) per share. On Wednesday it closed down at HK$12.50.

Browse the Diversity, Equity and Inclusion (DEI) web pages of corporate India and you may notice the frequent absence of one word: “caste”.

“Gender”, “sexuality”, “physical ability” and “race” all get regular mentions on these public-facing sites, but “caste” — which negatively affects the lives of hundreds of millions of Indians — is usually missing.

Occasionally, the term can be found in downloadable documents, such as a company’s code of conduct. But, often, it is omitted there, too.

“It’s not surprising — it’s not a topic most Indian companies want to talk about,” says Christina Dhanuja, a DEI-caste strategist based in Chennai, South India.

Caste — an ancient system of social hierarchy based on purity and heredity — is a sensitive topic in India because discussing it also means talking about the privilege of the upper castes and the role of the country’s dominant religion, Hinduism.

It is also a subject that induces fatigue, because much has already been tried. India banned caste-based discrimination when it wrote its new constitution after independence in 1947 and it reserves 50 per cent of government jobs and university places for marginalised groups.

But these quotas are contentious and breed resentment among those who feel they cannot land coveted government jobs as a result. “It’s why our officials are so inefficient,” the boss of a chartered accountancy company told the FT recently.

With these measures failing to bring about equality or the demise of caste, many have placed their hopes in economic growth and modernisation. Yet, increasingly, this appears to have been a false hope and caste is now the lens through which many are viewing economic inequality.

“An undeniably unique feature of economic inequalities in India is that they are closely intertwined with the deeply rooted caste system,” say economists including Thomas Piketty in a recent report for the World Inequality Lab (WIL), a Paris-based research organisation.

Indeed, it is such a feature that, this month, the south Indian state of Telangana became the third to hold a caste census, to establish which communities are being left behind.

India’s opposition parties are also calling for a national caste census — to which the ruling Bharatiya Janata party may have to agree, given that low-caste Indians make up the majority of the population.

Caste was first laid out in Hindu scripture 3,000 years ago and has evolved into a hierarchy of four levels: Brahmins, or priests, at the top; followed by rulers and warriors; then merchants and labourers; and, below all, the Dalits, or untouchables.

Priests and warriors, together, are referred to as the upper castes and they own about 55 per cent of the country’s wealth, according to the WIL. They are thought to account for about 20 per cent of the population, but no one knows for sure because the last caste census was in 1931.

Dalits account for about 16 per cent of the population, or 220mn people, and can still face exclusion or even violence because of their caste, especially in rural areas. Labourers — who can also face discrimination — account for about 50 per cent, or 700mn people.

People in companies like to say they are caste blind, but in reality caste is everywhere

Caste is not as strictly enforced in cities, but it still plays a role in almost all social and economic relationships.

“People in companies like to say they are caste blind but, in reality, caste is everywhere,” says Meenakshi, a DEI expert with the Chennai-based human resources consultancy Kelp who prefers not to give a surname because of its privileged caste associations.

Many people still get asked their caste in job interviews and some Brahmin groups organise Brahmin-only job fairs.

One CEO of an investment firm recently told the FT that he did not feel bad about the caste imbalance at his firm because “Dalits have the quota system for their jobs”. He added that his company has a corporate social responsibility policy that assists marginalised communities through charity.

DEI principles finally arrived in India via multinational companies a few years ago, and have taken off both as corporate policy and as a public relations tactic.

However, Meenakshi says its provenance meant it came with priorities dictated by the west: it gave huge importance to issues such as women and race, but largely skipped over the issue of caste.

Many Indian companies have stuck with this template, but Meenakshi, Dhanuja and others want to “Indianise” the model so it incorporates caste at a high level.

This, they argue, will be good for the companies involved, unlocking wider pools of talent and a greater diversity of views. They point to various studies by McKinsey, the management consultancy, showing that the more racially and gender diverse company is, the better it performs.

Similarly, in 2019, the Indian Institute of Management in Bangalore released a paper showing that, when two companies dominated by different castes merge or acquire one another, they generate more market value then when two companies dominated by the same caste unite. However, the paper also noted that most companies prefer to merge with or buy entities with the same caste profile.

This search for sameness affects Indian companies’ hiring, too. In 2012, Canadian researchers found that 91 per cent of board directors in India’s top 1,000 companies came from the top two castes.

And a study by Jawaharlal Nehru University, in that same year, showed that candidates with high-caste Hindu names were 60 per cent more likely to be called for interview than people with low-caste names if otherwise identical CVs were submitted.

Statistics on the exact make-up of organisations today are impossible to find because very few companies keep records on caste. However, anecdotal evidence suggests that lower castes are vastly unrepresented in well-paid jobs.

“In an office of one hundred, you might not find a single Dalit,” says Vaibhav Wankede, a marketing executive from Mumbai who has written about the difficulties of being lower caste in white collar workplaces.

Everything from the food we eat to the holidays we celebrate is a marker of who we are. Most Dalits just try to keep their heads down and get on with the work

He says that Dalits often feel they need to mask their identity at work. “It’s everything from the food we eat, to the holidays we celebrate — all of that is a marker of who we are and a potential reason for exclusion,” Wankede explains, adding that “most Dalits just try to keep their heads down and get on with the work.”

To address the issue, Dhanuja suggests starting with something small like a survey, and then building up to in-person awareness sessions where the impact of caste is discussed.

But she says the way managers ultimately decide to bring caste into their DEI polices depends on the industry, the composition of their current staff, and what goals they set.

Meenakshi advocates a similar approach, focusing on teaching people what casteism looks like, and rethinking hiring practices so companies spot candidates who have skills they really need.

“All too often, the definition of merit is shaped by the skills upper-caste candidates tend to have: good spoken English, social confidence,” Meenakshi cautions — adding that companies should not discount the tenacity and hard work it takes for a lower-caste candidate to get to the same interview as higher-caste candidates.

Lastly, Dhanuja says companies should consider putting out caste-positive jobs ads, explicitly stating that roles are open to people of Dalit or other marginalised backgrounds.

She would, she says, go further and set targets for lower-caste hires, but she knows from quotas in the state sector that this can easily fail if HR managers are unsupportive.

For companies that think this all sounds too much like hard work, Dhanuja points out that caste awareness is on the rise and failure to adapt is risky. “If a company doesn’t want to do anything about it, they are just exposing themselves to law suits and reputational damage,” she warns.

But Pratap Tambe — a manager at Tata Consultancy Services and a frequent speaker on caste — is less convinced. He warns that any sudden shifts could result in a “backlash from negatively impacted interests” and a “high risk” of false discrimination allegations.

China has prepared powerful countermeasures to retaliate against US companies if president-elect Donald Trump reignites a smouldering trade war between the world’s two biggest economies, according to Beijing advisers and international risk analysts.

Chinese leader Xi Jinping’s government was caught off-guard by Trump’s 2016 election victory and the subsequent imposition of higher tariffs, tighter controls over investments and sanctions on Chinese companies.

But while China’s fragile economic outlook has since made it more vulnerable to US pressure, Beijing has introduced sweeping new laws over the past eight years that allow it to blacklist foreign companies, impose its own sanctions and cut American access to crucial supply chains.

“This is a two-way process. China will of course try to engage with President Trump in whatever way, try to negotiate,” said Wang Dong, executive director of Peking University’s Institute for Global Cooperation and Understanding. “But if, as happened in 2018, nothing can be achieved through talks and we have to fight, we will resolutely defend China’s rights and interests.”

President Joe Biden maintained most of his predecessor’s measures against China, but Trump has already signalled an even tougher stance by appointing China hawks to important roles.

China now has at its disposal an “anti-foreign sanctions law” that allows it to counter measures taken by other countries and an “unreliable entity list” for foreign companies that it deems to have undermined its national interests. An expanded export control law means Beijing can also weaponise its global dominance of the supply of dozens of resources such as rare earths and lithium that are crucial to modern technologies.

Andrew Gilholm, head of China analysis at consultancy Control Risks, said many underestimated the damage Beijing could inflict on US interests.

Gilholm pointed to “warning shots” fired in recent months. These included sanctions imposed on Skydio, the biggest US drone maker and a supplier to Ukraine’s military, that ban Chinese groups from providing the company with critical components.

Beijing has also threatened to include PVH, whose brands include Calvin Klein and Tommy Hilfiger, on its “unreliables list”, a move that could cut the clothing company’s access to the huge Chinese market.

“This is the tip of the iceberg,” Gilholm said, adding: “I keep telling our clients: ‘You think you’ve priced-in geopolitical risk and US-China trade warfare, but you haven’t, because China hasn’t seriously retaliated yet’.”

China is also racing to make its technology and resource supply chains more resistant to disruption from US sanctions while expanding trade with countries less aligned to Washington.

From Beijing’s perspective, while relations with the US were more stable towards the end of Biden’s presidency, the outgoing administration’s policies had largely continued in the same vein as in Trump’s first term. 

“Everyone was already expecting the worst, so there won’t be any surprises. Everybody is ready,” said Wang Chong, a foreign policy expert at Zhejiang International Studies University.

Still, China cannot lightly dismiss Trump’s campaign-trail threat to impose blanket tariffs of more than 60 per cent on all Chinese imports, given slowing economic growth, weak confidence among consumers and businesses and historically high youth unemployment.

Gong Jiong, professor at Beijing’s University of International Business and Economics, said that in the event of negotiations, he expected China to be open to more direct investment in US manufacturing or to moving more manufacturing to countries Washington found acceptable.

China has been struggling to boost the economy amid doubts about its ability to hit this year’s official growth target of around 5 per cent, one of its lowest targets in decades.

A former US trade official, who asked not to be named because of involvement in active US-China disputes, said Beijing had been surgical in using the “arrows” in its quiver, wary of further eroding weak international investment sentiment.

“That constraint is still there and that internal tension in China still exists, but if there are 60 per cent tariffs or real hawkish intent by the Trump administration, then that could change,” the former official said.

Joe Mazur, a US-China trade analyst with Trivium, a Beijing consultancy, said Trump’s wider “protectionist streak” might work in China’s favour. The president-elect has pledged to impose tariffs of at least 10 per cent on all imports to the US.

“Should other major economies begin to view the US as an unreliable trade partner, they could seek to cultivate deeper trade ties with China in search of more favourable export markets,” Mazur said.

However, others believe Beijing’s planned countermeasures will risk hurting only Chinese companies and its own economy in the long run.

James Zimmerman, a partner with law firm Loeb & Loeb in Beijing, said the Chinese government might be “wholly unprepared” for a second Trump term, including “all the chaos and lack of diplomacy that will come with it”.

Zimmerman said a key reason why trade tensions could resurface was Beijing’s failure to meet obligations agreed in a 2020 deal with the first Trump administration that called for substantial Chinese purchases of US goods.

The “smart” action from Beijing would be to do whatever it could to prevent further tariffs from being imposed, Zimmerman said.

“The likelihood of an expanded trade war during the US president-elect’s second term is high,” he added.

Additional reporting by Haohsiang Ko in Hong Kong and Wenjie Ding in Beijing

Crouched around a whirring machine on the upper floor of Zongwei’s factory in Suzhou, a group of engineers puts China’s next generation of manufacturing equipment through its paces.

The research and development team is one of many across China racing to solve one of the biggest challenges facing its 6mn manufacturers: how to remain competitive as labour costs rise due to a shrinking working-age population.

Zongwei builds automated factory lines, which, unlike their mechanical predecessors that move an assembly line at a constant speed, whisk the product around at different speeds and directions between workstations along a maglev conveyor system. It claims to drastically reduce manufacturing times and counts China Tobacco, electric vehicle maker BYD, and Apple suppliers Foxconn and Luxshare among its clients.

More significantly, Zongwei is developing a technology that clearly falls into the category of “smart manufacturing”, which also encompasses the use of robots that are displacing human labour.

Beijing has so far embraced what it calls the “robot revolution” as a way to tackle rising labour shortages in its rapidly ageing population, offering the sector tax breaks and subsidies to encourage investment and procurement. Its success, however, will still depend on the human factor — specifically, on whether the remaining workforce will have the skills to handle these sophisticated machines.

China has — partly thanks to government support over the past decade — become the world’s largest market for industrial robots. Last year, it installed over 276,000, which represented more than half the global total, according to the International Federation of Robotics.

Chinese companies used to import most of their robots, notably from Japan, Germany and the US. But they have increasingly been replacing these with domestic models that often sell at a fraction of the price of foreign rivals’ offerings.

This is helping to drive down the cost of smart manufacturing equipment in China, but experts say there is still work to do to train the labour force that will use it. The complex machinery requires technical knowhow, including engineering skills to fix broken parts and an understanding of the software that manages the machines.

China’s manufacturing industry relies heavily on its nearly 300mn migrant workers, who leave their rural areas for urbanised coastal regions in search of better-paid factory jobs. However, despite improving education levels, as of last year just 52 per cent of migrant workers had a middle school education, while 14 per cent had only a primary school education.

Researchers have found that these migrant workers are the most likely to be displaced by robots. “Where robot adoption is higher, there is a reduction in the influx of workers from migrant areas,” says Osea Giuntella, associate professor of economics at the University of Pittsburgh and lead author of a National Bureau of Economic Research paper on the labour response to automation in China.

Migrant workers are increasingly opting for service sector jobs, such as food delivery. According to official statistics, in 2023, 28 per cent of migrant workers were employed in manufacturing but 54 per cent were in service sector jobs, which are often worse paid.

China does still has an abundance of engineers, though — in spite of the massive skills gap suggested by the education attainment levels. They tend to be employed as factory managers or in the R&D teams that are well-positioned to adapt automated technologies in factories.

Industry insiders argue that robots are simply taking over tasks that more and more workers are shunning. Henry Han, president of ABB Robotics China, says robots are “adept at taking on dull, dirty and potentially dangerous jobs that are difficult to recruit for”.

He adds that the adoption of robotics has been smoothed by the “well-educated engineers and skilled workers from hundreds of universities and vocational schools across China”.

Even so, there is still a need to train those skilled workers in new machinery. Provinces saturated with manufacturing, notably Guangdong, have launched training programmes to educate a new generation of workers. But researchers from Tsinghua and Fudan universities have found that courses at local universities or technical colleges often lack the equipment to teach up-to-date skills, instead relying on textbooks or outdated equipment.

The most effective training, they say, is done through the suppliers of robots and intelligent manufacturing equipment.

Zongwei’s deputy general manager, Jack Xu, says the company dispatches teams of engineers to install its products and to teach customers how to use the software that operates the factory line.

“We build the software ourselves,” he says. “It must be very easy to use. The customers don’t have much time to learn new things from suppliers so, if they don’t know how to use it, they will always call the supplier.”

Xu adds that fierce competition in China means customers can demand very hands-on aftersales service, creating a strong incentive to make machines easy to operate and avoid the cost of sending out engineers.

For example, Tusk Robots, a Guangzhou-based company making autonomous machines that can move pallets around warehouses and factories — replacing human-operated forklifts — takes an active role in educating its customers.

Michael Zhang, Tusk’s co-founder, says its first customer in China, the German engineering group Bosch, bought nearly 30 robots for its Xian plant manufacturing car parts, and was able to replace more than 50 workers who had been operating forklifts.

Tusk has a team of engineers that it sends to large clients, and a network of distributors with engineering expertise to service smaller clients, with a training programme that takes about two weeks.

Some larger companies have set up specialised institutes to provide formal certification. ABB Robotics China, for example, has set up a training institute in Shanghai that teaches customers programming and electrical and mechanical maintenance.

While some countries view rising automation as a threat to stable employment, Chinese policymakers view it as a tool to ensure the country remains a competitive destination for manufacturing.

Workers have responded, meanwhile, either by taking early retirement or engaging in technical training to gain a competitive edge over the machinery, according to the NBER paper.

“There is a perception that the economy is changing, and workers have to make a drastic decision: to undergo training or to go into retirement because the investment in their own human capital is not worth it,” Giuntella says.

IF you have a few Hot Wheels cars in your attic from when you were a child, now may be the time to check how much they could be worth.

Rare Hot Wheels models can fetch as much as £3,200 at auction, according to Peter Morris, an avid Hot Wheels collector and auctioneer at Vectis Auctions.

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Hot Wheels are a brand of model cars and race tracks, created my Mattel – the inventor of Barbie – in 1968.

While the majority of toy cars are unlikely to fetch thousands of pounds, you could still walk away with a handsome profit.

How to spot a rare and valuable car

Original Hot Wheels cars from the 1960s and 70s tend to be the most valuable, Mr Morris said.

“The most expensive ones are the original red line cars, which were made in the first ten years of production,” he explained.

“You can spot them because each tire will have a red ring on it.”

The cars should also have a date on the bottom of the base which will tell you when they were made.

Look out for cars that were produced between 1968 and 1977, he said.

These cars can be picked up for about £30 to £50 but can sell for hundreds of pounds at auction.

“The most expensive one we sold was £3,200,” Mr Morris said.

“It was a Mustang Boss Hoss and still had its original card box as if it had come straight from the shop.”

But it does not matter if you still have the box as these cars are still valuable without it.

Focus on the condition of the car as this will dictate how much it is worth, warns Robert Wilkin, an auctioneer at C&T Auctioneers and Valuers.

“The value of a car will depend on whether the paint is chipped and if the wheels go round,” he said.

“The axles on Hot Wheels cars are a lot thinner than on a Matchbox car because that makes them spin quicker, which makes them go faster on the track.

“If the wheels still go round nicely then the car is worth more money than if it’s got bent axles and the wheels are out of shape.”

Do not worry if you cannot get your hands on an original Hot Wheels vehicle as more recent models can still fetch hundreds of pounds.

In 1995 Hot Wheels maker Mattel began to release a limited number of “Treasure Hunt” cars into its regular selection.

In the very first set only 10,000 of each of the 12 treasure hunt vehicles were released.

Early versions can be identified by a horizontal green stripe, with “TREA$URE HUNT SERIES” written on the packaging.

More modern cars have a circle with a flame in it on the packaging or car to indicate that it is a treasure hunt car.

Meanwhile, in 2007 Super Secret Treasure Hunts were introduced as part of a revamp of the Treasure Hunt system.

These were spun off into a “hidden” series in 2012, when Super Secret Treasure Hunts were released with mainline cars.

To spot them, look out for a gold Treasure Hunt flame logo on the packaging.

The value of these cars can vary but some will be worth hundreds of pounds each, Mr Wilkin said.

“Some treasure hunts will be only worth about £10 in the box and some of them are worth up to £200, depending on which treasure hunt car you find,” he said.

“If they’re a more desirable sort of car then they could be worth a couple of hundred pounds each.”

It does not generally matter what year they were released in so look out for cars which were produced in the 1990s and 2000s or more recently.

Some of the modern cars which were produced to coincide with the release of films do hold their value, he adds.

“There’s a lot of Batmobiles out at the moment in the last year which could be worth getting,” he said.

“One is designed to look like a Scooby-Doo van which is quite a nice one.”

How can I sell my Hot Wheels online?

You can sell your Hot Wheels car online through websites such as eBay and Facebook Marketplace.

You will need to set up a listing for your Hot Wheels which must include pictures, a price and key information such as the year the car was released.

To do so you will need to take pictures of your Hot Wheels car.

Make sure to take a photo of any wear and tear on the surface, wheels or base of the car.

Try to find a professional photo from the manufacturer of the car from when it was first released.

This will help anyone interested in buying your car to visualise what it looked like when it was first bought.

Next upload your photos to the website of your choice and begin to build your listing.

You should write a description of the item and include the make and model of the car and the condition it is in.

If you want to buy a Hot Wheels car online then do not worry too much about whether it is genuine or not.

Mr Wilkin said: “Most of the time the car itself will be genuine. If it is in a sealed packet most of the time it will be real.”

If you are planning to buy an expensive car or you think that yours may be worth a lot of money then it may be worth contacting an auction house.

An expert can look at the car to make sure that it is original and can verify that your car is genuine.

Specialist auctioneers such as C&T Auctioneers and Valuers, Sotheby’s and Vectis Auctions can help you to value your item.

You do not need to live near the auctioneer to sell with them. Check the firms’ websites for more information.

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